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Coordination and Implementation of Social Protection Systems in China

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Coordination and Implementation of Social Protection Systems in China Coordination and Implementation of Social Protection Systems in China Argentina case study Document number Research on Coordination and Implementation of Social Protection Systems in China Acknowledgements This report was prepared by Development Pathways for the United Nations Department of Economic and Social Affairs (UNDESA), Division for Inclusive Social Development, within the framework of the project “Global research on the governance of social protection systems.” The project is jointly funded and overseen by UNDESA and the International Labour Organization (ILO). The lead author of the report is Professor Hong MI (Team Leader, Center for Non-traditional Security and Peaceful Development Studies), with inputs from Huilin MIAO (Team Member, Center for Non- traditional Security and Peaceful Development Studies), Rong YAN (Team Member, Center for Non-traditional Security and Peaceful Development Studies), and Ziqi Yu (Team Member, Center for Non-traditional Security and Peaceful Development Studies). Qiyini MA (Executive Team Leader, Center for Non-traditional Security and Peaceful Development Studies) provided oversight for the report. The authors are grateful for the constructive technical feedback from Aurelie Klein (ILO), as well as the overall guidance provided by Robert Venne (UNDESA), Oleg Serezhin (UNDESA) and Wenyan Yang (UNDESA). 2 Research on Coordination and Implementation of Social Protection Systems in China Table of Contents Table of Contents .......................................................................................................... i Table of Figures and Tables ......................................................................................... ii 1 Introduction ............................................................................................................ 3 2 Key messages .......................................................................................................... 6 3 Description of initial situation............................................................................. 13 3.1 Historical development of social protection .............................................. 13 3.1.1 The development before Reform and Opening-up .......................... 13 3.1.2 The development after Reform and Opening-up ............................. 15 3.1.3 Achievements of social protection development with Chinese characteristics ............................................................................................... 26 3.2 Challenges to expansion .............................................................................. 29 3.2.1 Limited coverage ............................................................................. 29 3.2.2 Inadequate and unbalanced development within the system ........... 32 3.2.3 Difficulties in operating social protection programs ....................... 34 4 Mechanisms to improve governance .................................................................. 37 4.1 High-level governance ................................................................................. 37 4.1.1 Vision of social protection with Chinese characteristics ................. 37 4.1.2 A common definition of social protection at the national level ....... 38 4.1.3 Institutional structures and policy designs ....................................... 40 4.1.4 Mechanisms for national coordination in social protection ............. 46 4.2 Mid-level governance ................................................................................... 47 4.2.1 Chinese social protection administrative system ............................. 47 4.2.2 Management instrument of social protection ................................... 50 4.3 Street-level governance ................................................................................ 61 4.3.1 Management of stakeholder interests............................................... 61 4.3.2 High-efficiency, traceability, and flexibility of management .......... 62 4.3.3 Social accountability for rights holders ........................................... 65 4.3.4 Appropriate mechanism for reducing exclusion errors and fraud ... 67 5 Conclusion ............................................................................................................ 71 Reference .................................................................................................................... 76 i Research on Coordination and Implementation of Social Protection Systems in China Table of Figures, Boxes and Tables Figure 3-1-1: Changes in the social protection model and the population covered after the Reform and Opening-up ................................................................................. 15 Figure 3-1-2: Number of people receiving zero-pillar pension benefits by age, 2019 19 Figure 3-1-3: Number of people covered by the first pension pillar system, 1989-2019 .............................................................................................................................. 19 Figure 3-1-4: Persons covered by Cheng-zhen-zhi-bao Pension Insurance, 1989-2018 .............................................................................................................................. 20 Figure 3-1-5: Persons covered by the Basic Medical Insurance, 1993-2018 .............. 21 Figure 3-1-6: Persons covered by the Work Injury Insurance and the Maternity Insurance, 1995-2019 ........................................................................................... 22 Figure 3-1-7: Persons covered by the Unemployment Insurance, 1992-2019 ............. 23 Figure 3-1-8: Historical events of China's Social Protection System .......................... 25 Figure 3-1-9: The revenue and expenditure of national social insurance fund, 1989- 2018...................................................................................................................... 27 Figure 4-1-1: The social protection system in China ................................................... 40 Figure 4-1-2: Institutional structures of China’s social protection system .................. 41 Figure 4-2-1: Basic structure of social protection administration system in China ..... 49 Figure 4-2-2: The “Strip-block” relationship in China’s public administration .......... 50 Figure 4.3-1: Regulation standard in the public administration practice of “No More Than Once” .......................................................................................................... 64 Figure 4.3-2: The procedure of hotline complaints on social security problems ......... 67 Table 3.1-1: Development of pension system in rural areas, 1982-now .............. 18 Box 1-1: The coordination between the central and local government in rural pension system of China…………………………………………………………………70 ii Research on Coordination and Implementation of Social Protection Systems in China 1 Introduction China is the world’s most populous country featuring a rapidly ageing population as well as a large portion of rural domestic migrant workers. As of November 2019, China's total population reached 1.394 billion. And according to UN data, the population is estimated at 1.439 billion by the mid-year of 2020, being equivalent to 18.47% of the total world population. In 2017, the proportion of Chinese citizens over 60 years old stood at 17.3 percent, with a total number of above 241 million. Although it is not currently among the oldest countries, China is in a process of rapid aging, with continuous decrease of active population proportion. It is expected that China's population aged 65 and above will reach 487 million, or nearly 35 percent in 2050. In 2019, the total number of rural domestic migrant workers in China reached 291 million with an increase of 61 million in the past 10 years. With the urgent aging situation and large quantity of rural domestic migrant workers, it is of great importance to establish an effective social protection system in China to render a better life for all. The social protection system of the People's Republic of China started with the relief to the disaster victims and unemployed workers and was marked by the establishment of labor insurance in 1951. During 70 years of development, China’s social protection has expanded its object scope from urban workers to all urban and rural residents, and changed from fragmented and incoherent to organized and overall planned, from a single project to a comprehensive security system, from slow exploration to rapid coverage growth. At present, China has successfully established a multi-layered social protection system based on social insurance, social preferential treatment, social relief and social welfare, which focuses on basic pension, basic medical care and minimum living security system, and supplemented by charity and commercial insurance. Apart from the three “pillars”— China’s state pension system (the first pension pillar), occupational and enterprise annuities (the second pension pillar) and private pensions (the third pension pillar)— China creates the “zero pension pillar” of social protection system, which is the endowment insurance that secures the subsistence of the poorest. In spite of many achievements, many challenges have emerged over the past few years. Firstly, there are still some vulnerable groups out of the social protection system due to the segmented schemes formed by pilot programs. How to cover more older people and domestic migrant workers in China is not an easy task. Secondly, the third-pillar pension system
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